Published: Thursday, April 3, 2014 at 6:24 p.m.

Last Modified: Thursday, April 3, 2014 at 6:24 p.m.

With a little more than a month before the N.C. General Assembly's short session on May 14, the discussion over North Carolina's film tax incentive is more deafening than ever as the program heads toward its year-end expiration date.

Implemented in 2010, the state's program offers a 25 percent refundable tax credit for film and TV productions that spend more than $250,000 on qualifying services in the state. The incentive has been a major factor in luring productions such as “Iron Man 3” and TV series “Under the Dome” and “Sleepy Hollow,” to the area.

Currently, 44 states offer incentives to film productions, in a variety of forms.

North Carolina's refundable incentive has been the subject of much debate since it was put in place. Some legislators, like state Rep. Rick Catlin, R-New Hanover, aren't convinced that the current incentive structure, in which the state pays out a lump sum to production companies, is the most beneficial program.

New Hanover County Rep. Susi Hamilton, a Democrat who supports the current incentive, said the refundable format is not as cut-and-dry as simply handing over a check.

“Predominantly, (those against the incentive) say things like, 'We're against anything where the state cuts a check,' but what they don't understand is that the state cuts a check for a number of things, tax returns being one of them,” Hamilton said. “The implication is that the state cuts a check without any understanding that the money from the industry has already been spent in the state. In other words, it is a rebate.”

Although no one against the incentive has filed any formal alternatives for it, Hamilton said she hears some would like to make the credit transferable, which would mirror the incentive offered by the state's rival in film production, Georgia. In the past few years, that state's transferable credit has attracted such high-profile projects as three sequels to “The Hunger Games,” “Fast and Furious 7” and four seasons of AMC's megahit “The Walking Dead.”

Because many production companies are not based in – and don't have tax liability in – the states in which they film, transferable credits allow them to sell those credits to other companies.

Catlin, who said he has a “constitutional concern” with the refundable incentive, wants to do more research into a transferable credit's pros and cons. He called the option a “compromise that could work.”

“Right now, the money that we give (for the incentive) goes out of state and leaves North Carolina. A transferable credit would keep it here and strengthen the return on the investment,” he said.

But Hamilton noted that while legislators are combing over other states' incentives for possible solutions, other states are looking here, particularly South Carolina.

“What we have today is not broken,” she said.

So, before any decisions are brought to the legislators, let's look at a few of the much-discussed terms that surround the incentive issue and how a selection of other states operate their incentive.

Glossary

Refundable: A credit that is filed through a tax return after representatives from the state's film office and the Department of Revenue review the money spent by the production and determine what is eligible. If a production has $10 million in qualifying expenses in a state with a 25 percent incentive, they would file their tax return and get a check from the state for $2.5 million.

Transferable: A credit that must be sold to a person or company that has a liability in that state. Certain states, such as Louisiana and Massachusetts, will buy those credits for 85 cents on the dollar or the holder can sell it for more elsewhere if they choose. Example: If a production has $10 million in qualifying expenses in a state with a 25 percent incentive, it would receive a tax credit of $2.5 million that can be sold to a state taxpayer. If it sells for 85 cents on the dollar, the production would receive $2.125 million cash.

Nonrefundable, Nontransferable: Unless you have a tax liability (or, in other words, owe taxes) in the state, the tax credit is worth nothing. Example: If a production has $10 million in qualifying expenses in a state with a 25 percent incentive, it would receive a tax credit of $2.5 million and must use it on it's own tax liabilities in the state.

Wage rebate: A rebate based solely on money spent on wages.

Carry forward: The time period for which a transferable credit can be held without selling.

Requirements: Since the state only allots $100 million per year (through 2017) for the incentive, all projects are put into a lottery system. There is a $1 million qualifying minimum for feature films and new television series, and a $500,000 minimum for TV movies and miniseries. Shows relocating from other places have no minimum. To qualify, a production must spend at least 75 percent of its principal production days or total production budget in the state. Projects are also required to acknowledge “The State of California and the California Film Commission” in its credits.

Requirements: A production must spend at least $500,000 locally to qualify. There is no compensation cap for projects, but there is a $500,000 cap per salaried employee paid by W-2. No cap for those paid through 1099 forms.

Requirements: Productions for a less-than-30-minute program must spend at least $50,000 to qualify, while projects running 30 minutes or more must spend $100,000. Screen credit required.

Sunset date: May 5, 2021

Recently filmed: “Chicago Fire;” “Chicago PD”

Famous productions: “The Dark Knight,” “Divergent” “Home Alone”

LOUISIANA

Incentive: 30 percent partially refundable, fully transferable motion picture, plus 5 percent bonus up to the first $1 million for each state resident

Requirements: A production must spend at least $300,000 to qualify. It must also must submit a detailed budget through distribution of film and provide a statement that the project meets all requirements. Screen credit required.

Requirements: The state awards $420 million in tax credits per year, but exercises no compensation caps for talent or projects. The state classifies productions in two groups – those who spend $15 million or less and those who spend $15 million or more. Based on its classification, a production will follow different requirements to apply for the incentive.

Requirements: A production must spend at least $250,000 on approved local services to qualify. There is a $1 million compensation cap for talent and each project can only earn $20 million from the incentive. Screen credit required.

Requirements: To qualify for the rebates, a project must apply 60 days prior to filming and spend at least $1 million. Only $10 million available yearly for wage rebate, approximately $16 million in funding available for 2013. Screen credit required.